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Why the Core Lithium (ASX:CXO) share price has sunk 20%

The Core Lithium Ltd (ASX: CXO) share price is down around 20% after a painful update.

Core Lithium is a hard-rock lithium mining company that owns and operates the Finniss lithium operation on the Cox Peninsula in the Northern Territory near Darwin.

Strategic review

The lithium miner said it has been undertaking a strategic review of its operations to address the deterioration in lithium market conditions.

Core Lithium said the price of spodumene concentrate (raw lithium) has declined more than 80% to date, including by more than 40% since the end of October 2023.

It’s focusing on things it can control, including reducing costs, enhancing the mine plan, timing growth projects and optimising assets.

The lithium miner pointed out it has seen an improvement in mine productivity and plant performance over ten months.

Options being considered include changes to the mining strategy and plan, such as “prioritising ore mining and possible temporary curtailment of mining operations, commercial solutions and reductions in exploration and other discretionary expenditures.”

Over recent months, the company has built a significant run of mine stockpile and said it will continue processing ore and making spodumene concentrate during the wet season.

The review will “prioritise preserving business value and future options. Given the difficulties associated with mining and construction in the wet season and the focus on reducing expenditure, BP33 early works have been suspended.” BP33 is the second proposed mine.

Future sales of its fines material will be subject to market conditions.

How much will this help?

Core Lithium said the cost reductions and productivity improvements being targeted by the company are expected to reduce expenditures and operating costs, however discussions with contractors and suppliers are not yet complete, so the amount of potential cost savings “is unknown”.

It will tell the market about cost-saving initiatives in the company’s quarterly report for the period ending 31 December 2023, unless anything material happens sooner.

Final thoughts on the Core Lithium share price

It makes sense for the business to focus on the long-term rather than the short-term, but the market wants to see success at all stages of the mine’s life.

Preserving cash and the mine is important, but mining nothing doesn’t make money either – the costs will continue.

It’s hard to say if this is a good time to invest because it could depend on the lithium price, which is tricky to predict.

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